I'm Retiring at 32, and You Can Retire Early, Too

Durbar Square Patan Nepal
By Brandon Sutherland
(a pseudonym)

Later this year, at the age of 32, I plan to quit my full-time job as a software developer and don't intend to look for another one. By then, I expect my portfolio will be large enough to fund my essential expenses for at least the next 30 years, if not indefinitely.

I've built my nest egg simply by watching my spending and investing as much of my paycheck as I can. I am currently investing more than 70 percent and no, that's not a typo -- of my after-tax income into my retirement and taxable investment accounts.

I'd Rather Travel the World

When I graduated from college with a degree in computer science, I was excited to work hard and build a successful programming career in Newbury, Vt., where I live with my wife, Jill. I thought maybe I'd even become wealthy along the way.

But then reality kicked in, and my life seemed to become one endless scene from "Office Space" after another. After a few years of pointless meetings and inept managers, my enthusiasm was gone, and the thought of spending the next 30-plus years doing the same thing was depressing to me.

I felt trapped because I had worked hard to get my degree and establish my career. I didn't feel as if I could just quit and start something new. I also didn't want to trade my high five-figure salary for a lower one, so I continued, albeit unhappily, on the same career trajectory.

Rather than use my salary to buy frivolous material things, however, I used my money to fund sabbaticals for several months at a time that enabled Jill and I to see the world. Jill is from Scotland, so every five years or so we would quit our jobs -- she works as an optometrist -- and spend several months in Europe and other countries. Because the market is strong for software developers, I never worried about finding another job, and often whichever company I worked with last would ask me to consult for them until I found my next gig.

One three-month stretch in China, Tibet and Nepal made me realize just how rich most Americans already are, myself included.This further drove home the realization that I didn't need to accumulate the things my peers had, like big houses and fancy cars.

Fast-Tracking Financial Independence

Taking these sabbaticals was what I saw value in -- but it wasn't until around 2011, when I stumbled across a website called Early Retirement Extreme, that I realized I could work hard for five to ten years to make those periodic trips more of a permanent fixture. I was already a pretty good saver, but what I read on the site encouraged me to ramp it up even more. All I would need to do to retire early was to save and invest until my portfolio reached at least 25 times my annual expenses.

Credit: Brandon Sutherland via LearnVest
Based on historical data, my thinking was that those investments should return an inflation-adjusted average of 5 percent every year. I calculated that I would only need to withdraw, at most, 4 percent every year to cover my estimated essential expenses -- more on those in a minute -- which means my portfolio should have a high likelihood of never running out of money.

The best strategy for me, both from a savings and tax perspective, was to max out tax-advantaged retirement accounts, including a 401(a), a 403(b) -- both are types of defined-contribution plans offered by my employer -- and a Health Savings Account. I max out all of these accounts each year, and get a 5 percent match on my 401(a). I also max out my Roth IRA, and anything that's left over, after expenses, goes into my taxable investment account.

As far as my portfolio strategy goes, I prefer passive investing -- putting my money into investments like mutual funds or exchange-traded funds that track an index, rather than actively trading in an effort to time the market. Studies have shown that, over the long term, passive investing beats out active investing. I invest the majority of my money in diversified index funds. My current allocation consists of 75 percent U.S. stocks, 10 percent international stocks, 10 percent real estate investment trust, and 5 percent cash. I'll likely transition into bonds as I get older but I'm happy to take on more risk now.

Since I'll most likely need to access my retirement money prior to standard retirement age, I also plan to build a Roth IRA conversion ladder. IRS rules allow you to roll over 401(k)s, traditional IRAs and 403(b) accounts into a Roth IRA and withdraw those conversions five years later, penalty-free. To build a consistent income stream after I leave my job, I plan to roll over amounts from my retirement accounts equal to my annual expenses every year, starting next year. Five years from the time I make my first rollover, I'll be able to take out that amount annually without paying any early-withdrawal penalties.

Living Simply Is Half the Battle

I give most of the credit for my ability to walk away from full-time employment to the low expenses my wife and I are able to maintain. We don't have car payments because we bought our used cars with cash. We live in a modest house with a very reasonable $600 per month mortgage payment. We have a Netflix subscription instead of an expensive cable package, and while we eat out occasionally, we prefer to cook our meals at home. All told, we're able to live comfortably on $2,200 a month.

We intend to shave our costs even further after I leave my job by spending parts of the year living in low-cost countries like Thailand and Guatemala. We enjoy traveling and experiencing new cultures, so we'd get to see the world and live on less at the same time. And luckily, I've become quite good at hacking travel by using miles, rewards points and premium status.

Jill plans to continue working as a locum optometrist (an optometrist who fills in at other people's practices) when we are in the States or in Scotland, but she will take off for a few months every year so we can live in other countries. Because we largely keep our finances separate, she still plans to cover her half of our expenses with her income, while my savings will cover my half.

I don't plan to spend the rest of my "retirement" sitting on a beach. I do want to make a meaningful contribution to the world, so I will continue working part time on my own projects, including web applications, mobile applications and writing projects -- including the blog I started about my journey to financial independence, madfientist.com -- and will use the money I earn to fund my discretionary spending.

I also plan to write music, learn languages, spend quality time with loved ones and develop new skills through volunteer work. The possibilities are endless, and having the time to explore those -- rather than stay chained to a career that no longer excites me -- is worth saving for.

Tips for Aspiring Early Retirees

If you're interested in leaving the daily grind early, I'd start with really picturing your life after leaving work. The more you can visualize what your perfect life will be like, the easier it will be to make "sacrifices" along the way. I put "sacrifices" in quotes because most of the lifestyle changes you make to achieve this goal will probably make you happier anyway. That's been the case for me.

I'd also suggest closely scrutinizing your expenses. You might be paying for things that don't make your life better, so you should cut those out immediately. For each expense, ask yourself: "If giving this up meant I could quit my job tomorrow, would I?" If you answer yes, that expense isn't as important to you as your financial freedom, so eliminate it from your life, or find a free or cheaper alternative.

In "Walden," Henry David Thoreau states, "Superfluous wealth can buy superfluities only. Money is not required to buy one necessary of the soul." These words rang true to me on my journey to financial independence, and while I still may not know exactly what my soul requires to be completely happy and content, I look forward to having the time and the freedom to find out.

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Sounds to me a lot of people are afraid to retire. I did when I was 62. You people are right you do loose relationships with the people you once worked with. But there are plenty of things to do and people to meet. I have made lots of friends thru golf and bowling. Lots to do and lots of people to mingle with.

April 14 2014 at 4:30 AM Report abuse -2 rate up rate down Reply

This guy reminds me of my friend who worked at yahoo in the 2000's... She spent her 20's and 30's getting paid well and travelling opportunistically. She left yahoo in 2008 and became a part time consultant. She married someone from her office who also made $100,000+ a year. Then when she turned 38 and realized time was up to have kids, she gave birth to a daughter. He still works and she is still hardly employed at all. They live in Silicon Valley which is very expensive and their savings is being drained as they buy their child everything ever made in China. She has started looking around for work, but with a long gap of unemployment on her resume she can't land a job. Long term unemployment tells a employer that you don't really want to work, you just work when you have to and that means unhappy worker.

So be careful about taking this writer's advice... Life changes. Medical conditions pop up. Babies are born. What you want out of life today might not be what you want out of life tomorrow. Also as other people have mentioned: inflation... Also, the stock markets won't always create a 5% return. I know they didn't 2008-2011. Lots of bonds defaulted too, including municipal ones. But, that decision to walk away from working is forever.. I know, I retired at 25 (15 years ago) and I seek employment to have something to do now that my kids are teenagers and have lives. I used to work 16 hours a day, 7 days a week, doing physically demanding work and now my muscles have grown soft. I probably can't even do 8 hours. So, just remember you are reading the opinion of a young person who has not experienced a decade or two of retirement to give you an educated opinion on how it all plays out. You are reading the opinion of a childless young person who hasn't faced any real challenges in life to know to prepare for them.

April 14 2014 at 3:00 AM Report abuse +1 rate up rate down Reply
2 replies to socioeconomist1's comment

Oh there is one other aspect to retiring before 40.... You lose touch socially with people your own age. I have dozens of friends who are on a totally different mental plane because their days are filled with work and mine are filled with retirement. My childhood friends and I were once all cut from the same cloth. We thought the same, we lived the same, we worked the same. Then I unplugged and spent 15 years polishing my education while they stayed focused on their jobs. They work, hit the bar, tell work stories, go home, and repeat. I am an outcast because I spent years studying economics, business, history, law, psychology, sociology, government, etc. They read the sports page and I read John Keynes General Theory. This Brandon Sutherland, myself, and Ben Franklin all did the same thing. Franklin had built up a massive media empire and was a millionaire in the 1700's only to give it all up at age 42 to pursue his education, writing, and experiments. Which sounds a lot like Brandon here with his software tinkering, blog, and cultural studies abroad. But, Ben Franklin left for France and never returned because all his Freemason and Junta buddies were left behind mentally. Franklin never even saw his wife after he went to France because there was nothing left for him in America. He needed to be with educated intellectuals, not simple frontier colonial folk. The educational institutions of Europe were too advanced compared to America at that time and Franklin had to find his own kind to be with. It is very hard to find people who decide to unplug at age 25, 32, or 42 and search for the meaning of life to have someone to relate with. To have someone that can offer you something you don't already have. When you are the most informed person in the room, everyone might be interested in what you have to say but chances are you are bored with what they have to say. This why some college professors have a hard time teaching freshman, I think. So, just know that when you retire young, as in all aspects of life.... There is both good and bad that results from the action of early retirement. I miss all the good times with my old friends. I often wonder if I would have been happier being a soda delivery driver that has no idea how money works and lives paycheck to paycheck like all my old friends. I see all my old friends together and know I am out of place with them. They know it too. I don't think they are jealous of me for my success, but at the same time I display a lot of opinions that counter their belief systems. When our school district had a budget shortfall, I pointed out how the bus drivers, cooks, and janitors were making $25 an hour and wages represented 85% of the spending. My worker friends called me a traitor for being the cause of slashed wages for their wives. They took it personal. But, $25 an hour for a job like that is insane in this economy. It was costing the school dist too much. A person will change when they retire for sure.

April 14 2014 at 3:46 AM Report abuse rate up rate down Reply

Retire and you will find yourself on the outside looking in at your old life... you will miss out being a part of a team at work and going through the trials and successes of the daily grind that form bonds. No coworkers will invite you to their weekend barbeque or their daughter's wedding. When you go to Florida on vacation, you will not go fishing for Marlin with 3 friends you have known since age 5 after time elapses... Who you are as a person will change. When you retire, your old friends and you will no longer connect spiritually or mentally. Your friendship will feel hollow even though it was forged two decades ago and there is trust. I will lend my old friend $10,000 if he needs it, but I can't sit and talk with him for an hour without becoming bored.

If you think about it... you spend 8 hours a day with coworkers and maybe 4 hours a day with your wife and kids... The whole world lives like that, so when you take a road less traveled, you wind up on a road less travelled. That means fewer people to have fun with.

I am not saying don't retire... I am not saying to retire. I am saying this is how things go when you retire young. Your working muscles get soft, and you change as a person to the point that it affects your social life. I retired at 25 and travelled. I pursued education. I wanted to know how the financial and commercial world worked in detail from the top to the bottom. I wanted to discover the truth about God and philosophy. One day I found myself 38 years old having completed my journey and finding my answers. Then I tried to return to normal and spend my days laughing and joking with old friends only to find out I was no longer in the same mindset....

April 14 2014 at 4:03 AM Report abuse rate up rate down Reply

Instead of traveling, start your own business. I know pleny of computer geeks who quit working for large hardware, software, and consulting companies and struck out on their own.

Further, what if you have children? You really can't travel the world, because you have a kid in school 9 months out of the year.

By the same token, instead of buying used cars with cash, buy a new car with cash and drive it for 10-14 years. I'm leary of buying used cars, because I know how some people abuse their cars and neglect routine maintenance.

Frankly, traveling can get boring. I know that after a week's vacation, I'm ready to go home.

And don't quit working. My father worked until he was 75, because he loved working.

April 14 2014 at 12:50 AM Report abuse rate up rate down Reply
1 reply to Kent's comment

go make me a big mac Kent... and take your dinosaur attitude with you.

April 14 2014 at 2:47 AM Report abuse rate up rate down Reply
worried man

Sure with burger hitting 25 bucks a pound by year end because we ship it all to China now while we buy Tilapia from them fed on Chinese poop. I can retire ? never

April 14 2014 at 12:21 AM Report abuse rate up rate down Reply

The guy is 32 but he takes sabbaticals every five years? When I saw that, it was clear why this was written under a pseudonym, because it is completely FALSE!

April 13 2014 at 11:24 PM Report abuse rate up rate down Reply

What a load of crap.. If this person was able to max out his 401K then he made too much money to invest in a ROTH account.. Which means the rest of this story is false and misleading..

April 13 2014 at 8:20 PM Report abuse +1 rate up rate down Reply

The only money advice anyone needs is this -

1) Pay off your debts as fast as you possibly can. If this means living in a crappy studio apartment and eating ramen everyday for a couple of years, do it. If you want to buy a car, get a reliable beater. Get insurance for $25/month from Insurance Panda. Forget about buying a house until your debts are paid off.
2) Once you are out of debt, stay out of debt. The only exception to this rule is a vehicle and a house. If you want to get a nicer car, buy used and be able to pay it off in a year or 2.
3) If you are going to stay in the same spot for at least 10 years, buy a house, preferably with at least a little bit of usable land. An acre is good, 5 acres is better. Take the amount you are pre-approved for and cut it in half - that's how much you should spend on a house. Come to the table with at least 20% down and make a couple of extra mortgage payments every year. If you're going to be transferred or relocate every 5 years, forget about buying a house and rent instead.
4) Develop multiple revenue streams. Do contract work. Start a business on the side. Invest in a business as a silent partner. Raise chickens, breed dogs or grow apples. Build websites. Buy and sell antiques. Acquire rental property. Sell something that generates residual income. Learn to play the currency markets or trade stocks. Do whatever you can to generate income from multiple sources.
5) Grow these multiple revenue streams to the point that they generate enough consistent and reliable cash flow to replace your current income.
6) Make as much as you can. Save as much as you can. Give away as much as you can.
7) Retire!- the sooner, the better. Be sure you understand that "retirement" doesn't necessarily mean you stop working, it just means having the freedom to do what you want to do, when you want to do it.
Don't be foolish and fall into the trap of trying to measure your wealth by the value of your assets. Markets change. Valuations fluctuate. Instead, measure your wealth by the amount of cash flow your assets consistently generate.

April 13 2014 at 7:52 PM Report abuse +2 rate up rate down Reply


April 13 2014 at 7:20 PM Report abuse +1 rate up rate down Reply

Don't move to Florida, you will die of old age by the time your 35.

April 13 2014 at 3:50 PM Report abuse +1 rate up rate down Reply
2 replies to Lillian's comment


April 13 2014 at 7:22 PM Report abuse -1 rate up rate down Reply
1 reply to RMS's comment

You are? Maybe you'll, but I'm to old to learn.

April 13 2014 at 7:54 PM Report abuse +1 rate up rate down

With the hurricanes, tornadoes, very bad drivers and muggings this will help contribute to an early demise.

April 13 2014 at 10:56 PM Report abuse +1 rate up rate down Reply

I retired at 46, expecting I would have to go back to work but I wanted a break and travel while young, healthy,adventurous. I took the same approach. Once I left the USA, I found out that life is actually better, living simple. What I had saved lasted longer and grew. I watched my investments closely so I could make decisions that benefitted me. 20 years later, I have not gone back to work. My retirement has grown to a fund that will last 30 more years and I travel in more comfort now as well as owning 2 homes...USA and abroad. TRY IT !

April 13 2014 at 12:46 PM Report abuse -1 rate up rate down Reply
1 reply to Connie's comment

You are correct. Life outside the US is much less stressful and enjoyable. I left 6 years ago and haven't regretted a minute.

April 14 2014 at 8:21 AM Report abuse +1 rate up rate down Reply